What’s been happening in the markets (November 2023) – Is NZ’s newest investment platform a good one?

In November 2023’s What’s been happening in the markets article we review a couple of new high interest savings products, dive into Simplicity’s new Homes and Income fund, and examine New Zealand’s newest investment platform Goldie which aims to be the Sharesies for real assets. Can they become a winner among Kiwi investors?

This article covers:
1. Product updates
2. Market Movements
3. What we’ve been up to

1. Product updates

New high interest savings products

Heartland Digital Saver

Heartland recently launched a new Digital Saver account, an on-call savings product which currently has an interest rate of 5.00%. Its interest rate comes in higher than Heartland’s existing Direct Call account which pays 4.60%.

That’s potentially good news for Heartland customers looking to squeeze a little more out of their savings, but the account does come with a catch when you look beyond the headline interest rate. On-call savings products often allow you to make withdrawals from them at anytime without any restrictions or penalties (unlike term deposits which lock in your money, or notice saver accounts which require advance notice to make withdrawals). However, the key difference with Digital Saver is that any withdrawals from the account will incur a $4 fee, apart from your first withdrawal each month which is free (though this fee is waived for the remainder of 2023).

Booster Savvy

Booster has launched their Savvy fund which also comes with a current interest rate of 5.00%. Unlike Heartland, Booster isn’t a bank, and instead they hold any funds with BNZ. In addition, Booster’s product comes with a few unique features:

• You can make unlimited withdrawals at anytime, without any fees or penalties.
• The product comes with a Mastercard debit card, so your money can easily be used for everyday spending.
• It’s structured as a PIE, so is taxed at your PIR which is capped at 28%.
• Depositors get $2,000 of accidental death insurance cover.
• You can categorise your money into multiple “stacks”, with the ability to automatically sweep your money across your stacks.

How do these accounts compare with other savings products?

With 5% interest rates, Heartland Digital Saver and Booster Savvy beat many of the highest on-call savings accounts in the market today. However, we’d say that Heartland Digital Saver is only useful if you don’t plan on making more than one withdrawal per month, otherwise their withdrawal fee could make you worse off than the competing options:

• Kiwibank Online Call – 4.50% (also available as a PIE)
• BNZ Rapid Save – 4.55% (fees apply when you make more than one withdrawal per month)
• Sharesies Save – 4.60%

These accounts still offer a lower rate than Squirrel’s on-call account which has an interest rate of 5.25%. However, with Booster Savvy being structured as a PIE, those on higher income tax rates (i.e. 33% or 39%) may find Booster advantageous on an after-tax basis. The extra features Savvy has may also make Booster’s product favourable.

A few of you may also be wondering about the likes of Rabobank PremiumSaver and Kernel Save who also offer rates of 5.25%. However, these accounts have some pretty big catches, so they’re not an apples-to-apples comparison with the above products. In Rabobank PremiumSaver’s case, your interest rate drops to 2.50% if you fail to increase your account balance by $50 each month. In Kernel Save’s case, you have to wait 34 days before you get the money you’ve withdrawn.

Simplicity launches a new property focussed fund

Simplicity has launched their new Homes and Income Fund, a unique fund that invests primarily in New Zealand housing related assets. The target asset allocation for this fund is:

• 25% – Simplicity Living. This is an investment in build-to-rent housing, where Simplicity Living builds apartments for the purpose of renting out. Simplicity Living can make money through development margins on completed properties, capital gains, as well as ongoing rental income. All current developments are on the Auckland isthmus, with aspirations to expand further across the nation.
• 25% – First Home Mortgages. Here money is lent to first home buyers as floating rate mortgages (as a potentially cheaper alternative to bank mortgages). Investors earn interest on this money at a rate higher than what bank deposits offer.
• 10% – Community Housing Bonds. This is money lent to community housing providers who build new and affordable homes. Interest is earned on these bonds.
• 40% – Cash & Cash equivalents. This large allocation towards cash is used for the liquidity of the fund (allowing investors to easily buy and sell units of the fund), given the above housing related assets are highly illiquid (can’t be bought and sold easily).

The fund charges management fees of 0.29% p.a. and the minimum investment is $1,000. At this stage it’s only available as a non-KiwiSaver fund.

Who is this fund suitable for?

This new fund may sound very exciting to Kiwi investors, especially if you’re investing with the desire to make an impact with your investments. You’d be putting some of your money towards increasing New Zealand’s housing supply, which is what Simplicity is aiming to achieve with this fund. Otherwise we see this as a very niche fund that isn’t too useful in many portfolios, due to the following reasons:

1. No unique assets – If you’re already invested in Simplicity’s diversified funds (i.e. their Defensive, Conservative, Balanced, Growth, High Growth funds), the Homes and Income Fund doesn’t provide anything new. Each of their diversified funds already invest in some or all of the assets contained in the Homes and Income Fund, so adding this fund to your portfolio won’t provide you with diversification into any new assets.
2. Conservative asset mix – The asset mix of this fund is similar to that of a conservative investment fund, targeting 75% income assets and 25% growth assets. It would likely be best suited to those investing for the relatively short-term, with the fund having a minimum suggested investment timeframe of 3 years. It’s probably not suitable as a longer-term investment or for true exposure to the property market (given only up to 25% of the fund is allocated to actual property via Simplicity Living). Those wanting exposure to property will likely be better served by the likes of REITs, shares of retirement village operators, property funds, and direct investment into housing. Longer-term investors may want to consider investing in funds with more growth assets.
3. Narrow range of investments – This fund is much less diversified than a traditional investment fund. For example, a traditional conservative fund will invest in hundreds of bond and shares across multiple industries and countries. However, the Homes and Income Fund largely invests in assets tied to the NZ property market. Therefore it’s unlikely to be a fund that makes up a core part of one’s investment portfolio, but rather a small satellite holding.

Goldie – Another new investment platform

Real assets (like real estate, gold, artworks) are traditionally hard to invest into. Real estate is expensive and requires a lot of money just to make a deposit to buy a property. Gold bullion can cost at least a few thousand dollars and be associated with hefty fees, as well as the inconvenience of storing it.

Goldie aims to solve the difficulties of accessing real assets by fractionalising them, starting by allowing kiwis to invest in fractionalised physical gold (with aspirations to offer other assets in the future). It works by having Goldie buying gold and digitally splitting that gold into thousands of shares. As a result you can buy a share of that gold and benefit from its capital gains (or losses) with just a little bit of money. The platform has initially bought a 1kg bar of gold stored in a vault in Wellington, and divided it into 10,000 shares, equating to a little over $10 per share.

The platform is currently open for early access, and will allow investors to buy and sell gold at the current spot price at anytime. They make money by charging the following transaction fees:

• 0.89% for buy transactions
• 0.50% for sell transactions

In addition, if you’ve invested $300 or more, a storage and insurance fee of 0.33% p.a. applies with a minimum charge of $1.50 per month.

Self-described as a Sharesies like platform for real assets, what Goldie is offering may seem innovative, however, this is not really a new concept:

• Established ETF providers already offer US listed funds that allow you to invest in gold with small amounts of money. For example, the SPDR Gold Shares ETF or iShares Gold Trust ETF, which you can buy through platforms like Sharesies or Hatch (though the fees of Goldie appear to be reasonable once you factor in the brokerage, FX, and management fees associated with these ETFs).
• Sugar Wallet also tried to offer gold to Kiwi investors, though they had little success and now appear to have pivoted towards offering gold investment to overseas markets.
• A few other Kiwi companies have had a crack at fractionalising real assets. For example, Opoly offered shares of property and land, though had limited success in doing so.

Overall we remain sceptical about the platform’s long-term viability. Real asset fractionalisation/crowdfunding has had a bad track record in New Zealand. Property fractionalisation platforms like Opoly, The Property Crowd, and The Ownery have all failed, despite offering an asset class that’s a favourite among NZ investors. And gold is very much a niche asset, so may be even more difficult to convince Kiwis to invest in over shares and funds. In addition, the platform has no substantial benefits over other gold investment options, including established ETF brands like SPDR and iShares. A harsh assessment for NZ’s newest investment platform, but we’d be very happy to be proven wrong.

Further Reading:
– Gold and Silver – Is it investing or gambling?

Lending Crowd shuts its doors

Lending Crowd was a peer-to-peer lending platform, which allowed investors to lend money directly to individuals and businesses and earn interest at rates much higher than what you’d get at a bank. The potential interest rates on offer were in the range of between ~10-20%, reflecting the higher risk of the P2P Lending asset class. On 15 November they closed their doors to new investors and loan applications.

Whilst Lending Crowd provided a solid platform and quality loans for people to invest in, we suspect the scale of the business wasn’t large enough to justify continuing its operations. It probably didn’t help that bank deposits have been more competitive in recent times, and that other investment options (like shares and funds) are now so plentiful. There was just no room for P2P to be in the spotlight. The closure of Lending Crowd follows Harmoney, another platform who shut down their P2P operations in 2020.

Sharesies quietly adds US shares transfers

The majority of investment platforms give their customers the ability to transfer their assets in or out of the platform. For example, if you owned NZX listed shares through Sharesies, you’re able to transfer these shares out to your personal CSN for $15 per holding. The platform also allows the transfer of ASX shares to your SRN for a fee of $50 per holding.

Sharesies previously hadn’t supported the transfer in or out of US shares, meaning those wanting to leave or join the platform would have to manually sell all their US shares and rebuy them on their new platform. That is until now, with the platform quietly adding US transfer functionality. The fees Sharesies charges for this are:

• Transfers into Sharesies from a DriveWealth partner (e.g. Hatch or Stake) – $35 USD per transfer request (you can transfer any number of investments within a request).
• Transfers out of Sharesies to a DriveWealth partner – $100 USD per transfer request.
• Transfers into Sharesies from a non-DriveWealth partner – $50 USD per investment.
• Transfers out of Sharesies to a non-DriveWealth partner – $50 USD per investment.

Additionally the platform you’re transferring your shares in or out of may charge their own set of fees. So unless you had a fairly large portfolio, utilising this transfer functionality probably isn’t worthwhile due to the high costs. It might be better to sell and rebuy your shares on your new platform, or simply leave your shares on your existing platform.

Flint adds some key features

Flint is a fund platform similar to InvestNow, offering a wide range of funds from a variety of fund managers. They’ve been missing a few key features since they launched in early 2022, but have finally addressed some of these shortcomings by recently adding joint accounts as well as the ability to auto-invest in funds. Flint rounds out these updates by adding a new fund manager to their mix with five Generate funds:

• Generate Balanced Managed Fund
• Generate Conservative Managed Fund 
• Generate Focused Growth Managed Fund 
• Generate Australasian Managed Fund 
• Generate Global Thematic Managed Fund 

Further Reading:
– Flint Wealth review – A superior InvestNow clone?

2. Market Movements

We haven’t published a monthly update article for a while, so let’s see how markets have performed over recent months. Here’s some performance figures for between 1 September 2023 and 23 November 2023, in both their local currencies and in NZ dollar terms:

	Local currency	NZD
NZ shares (S&P/NZX 50)	-3.18%	-3.18%
Australian shares (S&P/ASX 200)	-3.78%	-3.86%
US shares (S&P 500)	1.09%	-0.13%
Bitcoin	44.67%	42.87%

There’s a lot going on in the world, but inflation and interest rates continue to be the main driver of where the market is headed. Earlier there were fears that interest rates haven’t reached the peak yet, hence the market weakness you might have experienced throughout September and October. However, more recently we’ve seen that inflation is trending down faster than expected, giving optimism that rate hikes are done and that they’ll come down a little sooner. That’s provided somewhat of a recovery in the markets throughout November. The crypto market has been very strong in recent months, thanks to optimism around Bitcoin ETFs being approved for the US market.

Here are our year-to-date returns:

	2023 YTD returns Local currency	2023 YTD returns NZD
NZ shares (S&P/NZX 50)	-2.49%	-2.49%
Australian shares (S&P/ASX 200)	-0.13%	0.92%
US shares (S&P 500)	18.68%	24.50%
Bitcoin	127.19%	138.35%

3. What we’ve been up to

Some of you may have noticed that we’ve much less active with Money King NZ recently. That’s not only because we’ve been busy with personal projects and overseas travel, but there’s simply been less going on in the investing world so fewer topics for us to write about. Plus it seems like the clever investors are just getting on with regular contributions and trying to survive the market volatility, rather than reading blogs and trying to tinker with their portfolios. But hopefully in the coming weeks, we’ll have a couple of great new articles out for you to enjoy before Christmas.

Outside of investing, we have a few food highlights from recent months:

• We satisfied our fried chicken cravings at both Sneaky Snacky (K’ Road) and Nene Chicken (CBD). The former was fantastic, while the fast food chain Nene didn’t live up to the hype.
• We’re continuing our search for Auckland’s best croissant. Mor (Remuera) was a solid contender, while Mibo (Mt Eden) had an amazing pistachio croissant.
• Mr Money King NZ’s favourite, the classic steak and cheese pie, was also on the menu. This time we visited the award winning Rosedale Bakery & Cafe (who also do a great sausage roll).

Thanks for reading and your ongoing support!

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Disclaimer

The content of this article is based on Money King NZ’s opinion and should not be considered financial advice. The information should never be used without first assessing your own personal and financial situation, and conducting your own research. You may wish to consult with an authorised financial adviser before making any investment decisions.